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Federal Investigation of Price Fixing by Sotheby's
and Christie's
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Sotheby's and Christie's are two
of the world's most prestigious and profitable art auction
houses. The pricing at which they sell art — especially
contemporary art — closely mirrors the significance
and attention accorded the art
by academic researchers and curators.
Are commercial sales and
academic research related? If they are, then how? If
there are parallel distortions in the commercial and academic
focus,
what
influence
might price
fixing in the commercial field have on what appears in academic
and curatorial research?
The
articles referenced in this Tab provide an idea of
how art has been priced in the commercial world, as disclosed
through reports on the Federal civil and criminal investigation
of Sotheby's
and
Christie's regarding price fixing.
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Top
Art Dealers Are Subpoenaed In Possible Price-Rigging Scheme,
New York Times, 06/03/1997. |
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Under a Harsh
Spotlight, the Art Market is Sweating: Dealers and Auction
Houses are Terrified as
Federal Investigators
Ask about their Private Realm, New York Times,
07/02/1997. |
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A
Flair for Retailing Is applied to Art, New York
Times,
02/22/2000. |
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Top
Executives Quit Sotheby's As Art World Inquiry Widens,
New York Times, 02/22/2000. |
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A
Visible Chief Has a Head for Numbers, New York Times, 02/22/2000. |
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Is the Art World's Cult
of Secrecy About to End?: Going? Going? Gone!, Village Voice, 03/21/2000. |
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Ex-Leaders
of 2 Auction Giants Are Said to Initiate Price-Fixing,
New York Times, 04/07/2000. |
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Genteel
Auction Houses Turning Aggressive, New York Times, 04/24/2000. |
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Art
Auction Houses Agree to Pay $512 Million in Price-Fixing
Case, New York Times,
09/23/2000. |
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Former
Sotheby's Chief Is Said To Be Planning to Plead Guilty, New York Times, 10/05/2000. |
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Building
Malls And Selling Art, New York Times, 10/05/2000. |
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In
Plea, Sotheby's Ex-Chief Points to Her Superior, New York Times, 10/06/2000. |
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Memos
at the Heart of Antitrust Case Point to Ties Between Auction
Houses, New York Times, 05/25/2001. |
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Top
Art Dealers Are Subpoenaed In Possible Price-Rigging Scheme,
Carol Vogel, The New York Times, 06/03/1997,
pp. A1 & B7.
This article reported that "Justice
Department investigators have subpoenaed truckloads of financial
documents from more than
a dozen prominent Manhattan art dealers and from Sotheby's and
Christie's, the world's largest auction houses, in what appears
to be a wide-ranging antitrust investigation."
On the basis of questions asked of them
and their lawyers, art dealers said they believe investigators
were looking for the
possibility of collusion and price fixing among art dealers buying
at auctions.
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Under
a Harsh Spotlight, the Art Market is Sweating: Dealers and
Auction Houses are Terrified as Federal
Investigators Ask about
their Private Realm, Carol Vogel, The
New York Times,
07/02/1997, pp. C11&19.
This intriguing article reported that "The
rarefied and secretive world of Manhattan art dealers has been
shaken by a
Federal investigation into possible price fixing."
"As details come to light, what
appears to be a wide-ranging antitrust investigation looms
larger than dealers first imagined,
and some worry that basic ways of doing business are being called
into question."
The article explained that "the
business of fine art has always been considered insular, if not
elitist." It characterized the art marketplace as "a
field that tended to make its own rules until the early 1980's,
when the NYC Dept. of Consumer Affairs began imposing consumer-protection
regulations."
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A
Flair for Retailing Is applied to Art, Carol
Vogel, New York Times,
02/22/2000, pp. C1&12.
The Times reported on the fine art
bona fides of Sotheby's chairman, A. Alfred
Taubman. Mr.
Taubman is a real estate developer who has been cited as one
of the key originators
of suburban shopping centers. And he was described also
as "an
art collector and socialite, known from Manhattan to Southampton
to London to Palm Beach for his luxuriant lifestyle."
The article detailed that Mr. Taubman "expanded
his billion-dollar empire in 1983 when he bought Sotheby's,
thereby marrying his
lifelong passion for art with his skill as a retailer and developer."
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Top
Executives Quit Sotheby's As Art World Inquiry Widens,
Carol Vogel, New York Times,
02/22/2000, pp. C1&12. Ms.
Vogel reported in this article that "As
it deals with a widening federal anti-trust investigation,
Sotheby's the leading
worldwide auction house, yesterday announced the resignations
of A. Alfred Taubman, its major shareholder, as chairman and
Diana D. Brooks, arguably the most powerful woman in the art
world, as president and chief executive."
She described the issue here: "Any
illegal collusion could involve tens, if not hundreds, of millions
of
dollars."
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A Visible
Chief Has a Head for Numbers,
Carol Vogel, New York Times, 02/22/2000, pp. C1&12. Here,
the Times reported that: "Diana
D. Brooks, known as Dede, is said to have such a keen head
for numbers that she can
calculate auction totals faster than Sotheby's computers."
Ms. Brooks's background for the fines arts
is reportedly only her prior experience at Citibank, where
she had been a lending officer. "While
she had no background in the arts, she began in Sotheby's finance
department and worked her way through the ranks to become the
first woman to be named president of an auction house."
The article said that her husband is Michael
Brooks, a venture capitalist at J.H. Whitney and she served on
boards
including
those of Yale
and
Morgan Stanley Dean Witter.
The article did not report her having any training in the arts.
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Is the
Art World's Cult of Secrecy About to End?: Going? Going? Gone!,
Barbara Pollack, Village Voice,
03/21/2000, pp. 64-65.
In this article, Ms. Pollack noted that
the Federal investigations into Christie's and Sotheby's was
ending up focused on "the
cult of secrecy that still pervades the art market."
It emphasized that although neither Christie's
nor Sotheby's had admitted culpability, the resignations of
their CEO's and Sotheby's
chairman and chief stockholder "have led to the most negative
interpretation of the shady facts."
She wrote that "What has shocked
the art world is the fact that the federal government has
decided
to treat Christie's
and Sotheby's as it would any other business." And "many
of the dealers were gleefully adding rumors of their own," she
continued.
"This is just the tip of the iceberg," one
dealer was quoted as saying. "Wait until the feds
find out about the private sales," said an art consultant.
She also quoted Andrew Schoelkopf, former
head of business development at Christie's, and now CEO at
Onview.com, an online art enterprise. He said: "The art business has prospered for centuries on
the basis of incomplete or inaccurate information. Now companies
are making it much more efficient and easy for collectors and
scholars to access information in a timely fashion."
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Ex-Leaders
of 2 Auction Giants Are Said to Initiate Price-Fixing,
Douglas Frantz, Ralph Blumenthal and Carol Vogel, New York
Times, 04/07/2000, pp. A1&C2.
In this article, the Times' reporters described the escalating
gravity of the investigation. "Prosecutors in the federal
anti-trust investigation of Sotheby's and Christie's have evidence
that a scheme to limit competition by fixing commissions charges
to buyers and sellers was set in motion not by subordinates,
but by the chairmen of the world's auction giants at the time,
according to people involved in the investigation."
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Genteel
Auction Houses Turning Aggressive,
Carol Vogel and Douglas Frantz, New York Times,
04/24/2000, pp. A1&B6.
In this article, the Times looked even
more closely into the business practices of the art
market
For example, "A highly publicized
federal anti-trust investigation of Sotheby's and Christie's
has raised questions about whether
the aggressiveness crossed the line into illegality with an agreement
between the houses to fix the commissions charged to buyers and
sellers. But whatever may have gone on behind the scenes, it
is clear these temples of style and wealth have been changed
by a modern-day quest for market share and growth."
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Art Auction
Houses Agree to Pay $512 Million in Price-Fixing Case,
Carol Vogel and Ralph Blumenthal,
New York Times, 09/23/2000,
pp. A1&C5.
Here Ms. Vogel and Mr. Blumenthal described
the bombshell results of the Federal investigation: "The
world's largest auction houses, Sotheby's and Christie's, agreed
yesterday to pay $512
million to settle claims that they cheated buyers and sellers
in a price-fixing scheme dating back to 1992."
The U.S. Justice Department prosecutors
were trying to conclude a "three-year criminal investigation
focusing on evidence that the two auction giants stifled competition
by colluding
on a host of business practices."
The court records included documentation
recording years of secret meetings by top officials of the
two art auction houses focused
on "colluding on fees paid by buyers and sellers as well
as a host of other business practices."
It reported that the two art auction houses
would have to split the approximately $1 million in additional
costs
to
notifying
the 120,000 buyers
and sellers and to cover related administrative expenses.
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Former
Sotheby's Chief Is Said To Be Planning to Plead Guilty,
Ralph Blumenthal and Carol Vogel," New
York Times, 10/05/2000, pp. A1&C6.
Here the Times wrote about Diana D. Brooks,
the former president and chief executive of Sotheby's, agreeing
to plead guilty to conspiring
to violate antitrust laws in collusion with Christie's. Christie's
is described as Sotheby's arch rival.
Ms. Brooks was purportedly seen as one of the most powerful
women in the art world. The felony plea would leave Ms. Brooks
facing up to three years in federal prison and a large fine.
The Times also reported a related deal here
where Sotheby's also agreed to plead guilty to violations of
antitrust
law and pay
a fine of $45 million. That was described as in addition to the
huge settlement two weeks earlier in a civil case arising from
the same federal criminal investigation.
The Times also reported here that Christie's
would receive conditional amnesty as long as it continued
to cooperate with the Federal
prosecutors.
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Building
Malls And Selling Art, Ralph
Blumenthal and Carol Vogel,
New York Times, 10/05/2000, p. C6.
Mr. Blumenthal and Ms. Vogel reported here
that A. Alfred Taubman is a shopping mall magnate who never
finished college. They wrote
how he transformed strip malls into upscale shopping centers
opening the nation's biggest mall in Schaumburg. Ill in 1971.
They reported how he "rescued a bloated
Sotheby's from corporate raiders in 1983 and turned it into
a retail center for art." And
they concluded with the "axiom: selling art is not
too different from selling root beer."
Mr. Taubman, with homes in Palm Beach and
Southampton, purportedly infused Sotheby's with 80's glamour,
before he resigned as chairman
on Feb. 21, 2000, after Christie's announced it was cooperating
with a criminal antitrust investigation. But Mr. Taubman
remained the controlling shareholder of the auction house.
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In
Plea, Sotheby's Ex-Chief Points to Her Superior,
Ralph Blumenthal and Carol Vogel, New York
Times,
10/06/2000, pp.
C1&15. This article
reported that, "Speaking
in a low, controlled voice, Diana D. Brooks, the former president
and chief executive
of Sotheby's auction house, pleaded guilty in a federal courtroom
in Manhattan yesterday to fixing commission fees with the company's
arch rival, Christie's, and pointed the finger at A. Alfred Taubman,
Sotheby's former chairman, whose orders she said she was following."
It also reported that Mr. Taubman, the
Detroit shopping center magnate who bought a controlling interest
in Sotheby's in 1983,
quickly issued a denial through a spokesman who said, "Whatever
Ms. Brooks chose to do, she did completely on her own without
my knowledge or approval."
The Times emphasized how the pleas by
Sotheby's and Ms. Brooks, and the information disclosed by
the Justice Department's antitrust
division in Washington "put a strong spotlight on an industry
that for all its art and glamour prefers to keep its financial
practices out of public view."
"Those charged today were engaged in classic cartel behavior
of price-fixing, pure and simple," A. Douglas Melamed, acting
assistant attorney general for the antitrust division was quoted
as saying.
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Memos
at the Heart of Antitrust Case Point to Ties Between Auction
Houses, Carol Vogel and Ralph Blumenthal,
New York Times, 05/25/2001,
pp. A1&C5.
In this report, the Times detailed some
of the art market practices exposed by the Federal antitrust
investigation. "Handwritten
memos at the center of the collusion case of Christie's and Sotheby's
auction houses suggest that the companies secretly altered time-honored
and costly inducements used to attract sellers. Acting
together, they dropped low-interest loans, ceased making donations
to sellers'
favorite charities and devised a system to increase their profits
when art sold above a guaranteed minimum, according to the documents."
It continued, "The arrangement beyond
the already admitted collusion of fixing the commission fees
paid by sellers paint
a picture of competitors operating not so much as cutthroat rivals
but almost as cozy partners, happy to consult each other on matters
big and small to the detriment of their customers."
This article reported on the documentation
federal prosecutors got from Christie's, which cooperated with
the antitrust investigation. The documents
suggested that "more Christie's executives knew
about the collusion than has been previously reported and that
the officials discussed it, sometimes in worried terms. They
also suggest that top officials at Christie's were keenly aware
of the law and believed that they could skirt it."
Ms. Vogel and Mr. Blumenthal write how
the case has "scandalized
the $4 billion international auction industry" for two years
and how it resulted "in a half-billion-dollar civil settlement
with both houses, and guilty pleas by Sotheby's and its former
chief executive, and the growing criminal investigation."
After all, this investigation resulted not only in federal criminal
conspiracy charges, it also resulted in a civil class-action
lawsuit brought by 130,000 buyers and sellers that was then settled.
The sentencing of Diana D. Brooks, former
president and chief executive of Sotheby's was set for Nov.
19. The trial of A. Alfred
Taubman, Sotheby's former chairman, was expected in October. The article also reports, "Whether Ms. Brooks gets a prison
term hinges largely on how the government and United States District
Judge Richard Berman perceive her cooperation with the prosecution."
[The attention
contemporary art receives in academic and curatorial research
seems to have significant parallels with commercial market
prices.
The next Tab
includes articles on the federal price fixing trial of Sotheby's,
the world famous art auction house.] |
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